Be Sure To Check Out Gold Circuit Electronics Ltd. (TWSE:2368) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gold Circuit Electronics Ltd. (TWSE:2368) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Gold Circuit Electronics' shares before the 27th of June in order to be eligible for the dividend, which will be paid on the 26th of July.

The company's next dividend payment will be NT$3.499996 per share, and in the last 12 months, the company paid a total of NT$3.50 per share. Based on the last year's worth of payments, Gold Circuit Electronics stock has a trailing yield of around 1.8% on the current share price of NT$200.00. If you buy this business for its dividend, you should have an idea of whether Gold Circuit Electronics's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Gold Circuit Electronics

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Gold Circuit Electronics's payout ratio is modest, at just 39% of profit. A useful secondary check can be to evaluate whether Gold Circuit Electronics generated enough free cash flow to afford its dividend. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Gold Circuit Electronics's earnings have been skyrocketing, up 80% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Gold Circuit Electronics has delivered 28% dividend growth per year on average over the past three years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Gold Circuit Electronics worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Gold Circuit Electronics paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Gold Circuit Electronics is facing. In terms of investment risks, we've identified 1 warning sign with Gold Circuit Electronics and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com